What are No-Frills Mortgage Products?
While No-Frills mortgage products typically offer a lower – or more discounted – interest rate
when compared with many other available products, the lower rate is really their only perk.
This type of product will only seem ideal for you if you have no plans to take advantage of
benefits that will help you pay off your mortgage faster – such as pre-payment privileges
including lump-sum payments.
Essentially, this product is only ideal for: first-time homebuyers who want fixed payments
and have limited opportunities to make lump-sum payments during the first five years of their
mortgage; and property investors who need a low fixed rate and are not concerned with making
lump-sum payments.
No-Frills products also won’t let you take your mortgage with you if you purchase another
property before your mortgage term is up – ie, portability is not an option with this product.
Portability is an important option that could save you money over the long term if the home of
your dreams is within your reach before your mortgage term is up and rates have risen, which
they have a tendency to do over a five-year period.
It’s understanding why these products may seem appealing. After all, during tougher economic
times who has the extra cash to put down a huge lump-sum payment? And who needs a portable
mortgage if they’re not planning on moving until the market picks up? But it’s important to
remember that a lot can change over the course of five years – or whatever term you choose for
your mortgage.
The thing is, you can still obtain great mortgage savings without giving up the perks of
traditional mortgages. For starters, many lenders are willing to offer significant discounts if you
opt for a 30-day “quick” close.
There are, however, other ways in which to earn your own discounts. For instance, by switching
to weekly or bi-weekly mortgage payments, and by obtaining a variable-rate mortgage but
increasing your payments to match those of the going five-year fixed rate, you’ll be ahead of the
typical 0.1% discount of a No-Frills product within approximately three years.
No-Frills products represent a great example of why interest rates are not the only important
factor to consider when deciding whether to opt for a particular mortgage product. Much like
buying a car, you get what you pay for. If you don’t want a car with air conditioning, a stereo, a
cup holder, and so on, then you can get the cheapest car going… but you’ll likely regret it later.
About the Author
Gemma Riley-Laurin
Mortgage Agent
Licence # M08005023
Dominion Lending Centres Integrity Financing
Licence # 10933
Tel: 613-290-0196
Office Tel: 613-845-0786
Toll Free Fax: 1-888-241-2980
Web: www.thelaurinteam.com
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